We all have bad habits that are hard to kick, but perhaps the annual Rand value you lose to them every year will persuade you.
Bad habits. To have and to hold. Why won’t we just get rid of them? Why? Well, let’s consult financial ‘whizz man’ (I mean, he’s not a kid is he?), Warren Buffet:
“Chains of habit are too light to be felt until they are too heavy to be broken.”
Ain’t that the truth.
5 Bad Habits That Are Costing You Money
Nobody wakes up in the morning and thinks to themselves: “Today, I think I’ll pick up a bad habit that I’ll probably regret later.” Building a destructive habit, whether financial or otherwise, involves a spur-of-the-moment decision that sticks. Or, continually delaying time-sensitive decisions.Insidious.For instance, saving for retirement. You know you need to start early, but you delay. “Next month,” you say, every month. You can’t really feel the cost now so it’s easy to push that decision aside. Until you’re 35 and suddenly your shortfall to barely survive at retirement age is now more than your bond instalment.We get it, the world we live in trains us to respond to instant gratification. We can’t feel the immediate benefits of saving for later (or the costs of not doing so). But we can experience the benefits of delayed gratification on a smaller, more immediate, scale. Like recognising and tackling the costs of these bad habits.
South Africa has really cultivated an ingrained coffee culture. Is anyone else finding it strange that you can buy your grande cappuccino at most petrol stations? You’d probably find it strange should there not be a capable barista where you fill up.You bought yourself that fancy french press, and yet, every morning you still find yourself at Vida because you’re running late. Again.Average cup of coffee = R23.351 cup per day (only on weekdays) = R6 071
2. Your Undying Loyalty To Fast Food
We get why fast food is a thing. We’re busy. We’re hungry. And who wants to sacrifice vegetating on the couch to pack in lunch every night? Or those extra few minutes of shuteye in the morning to plan ahead for supper (taking the chicken out of the freezer)? It’s a tall ask. But. There’s a cash reward. It’s called saving for something better.Average fast food meal for one person: R551 meal, 3 times per week = R8 580
We don’t know why we’re including this here. If you smoke, you know the statistics. You’ve read the warnings on the box. And you still smoke. What we hope is that, possibly, you’re a wildly irrational person and just realising how much money you’re spending annually would be the last straw for you.Average pack of cigarettes = R38 (That’s without the 'sin tax' increase of R1.06 per pack effective 1 April 2017)Three packs per week for one year = R5 928
4. Sugary Refreshments
Those sugary drinks taxes may not yet have come into effect, but when it does, you’re looking at paying an extra “2.1c per gram of sugar content in excess of 4 grams per 100ml”. Cutting this habit completely (water is a luxury drink now, you know), will save you the following:Average 2L bottle of Coke = R16Three bottles a week for one year = R2 496
More ‘sin tax’ increases in this department I’m afraid. Your weekly G&T’s are about to take a knock. As of 1 April 2017, the increase per bottle of spirits went up by R4.43. Ouch. Other increases include beer (11c more per 340 ml can)‚ unfortified wine (30c more per litre), and fortified wine (35c more per litre). Traditional African beer will not be affected.But even without the increases, this is how much you’re spending.One mid-range bottle of wine + one 500ml domestic beer = R60 + R17.97One bottle of wine and say three beers a week for one year = R5 923.32If this is your lifestyle, you’re spending R28 998.32 a year to support it. Does it seem like a lot? Maybe you’re thinking to yourself that over a year it’s not that much. But let’s look at it differently.
A Different Perspective And Two New Habits
Say you owe R50 000 on a credit card with 18% interest and you can only afford the minimum repayment. If you continue paying only the minimum every month (R1 015 - decreasing), you end up paying R189 540 over a period of 69 years and 2 months.
1. A Higher Instalment On Your Debt Repayment
If you give up smoking and drinking coke completely, cut down your fast food intake to once a week, and only treat yourself to coffee once a week, you still save R19 000.80. That’s without even touching the alcohol spend.If you ploughed that into a higher repayment on your credit card instalment (taking it up to R2 459 per month) you’d pay R59 024 over two years. That’s a saving of R130 516 in interest.
2. Pay Yourself First
But suppose you’ve already paid off your credit card or high-interest bearing loan – or you’ve already doubled your instalment, you could actively save the money. In a unit trust, as an example. R19 000.80 over the year is R1 583.40 per month. Save that in a unit trust with an average growth of 9% for five years and you’re looking at R90 000 in contributions saved plus R23 193 on top of that, earned in interest. Total savings: R113 293.00.